The One Metric That Determines An Organization’s Future Success

What if I told you there was ONE question you could ask your customers and their answers would indicate the probability of your organization’s success in the future. The question is this:

“How likely is it that you would recommend us to a friend or colleague?” [score from 1 to 10, with 10 being the best]

This question has been found to be one of the best indicators for an organization’s potential because it gauges the true level of customer satisfaction. It is not enough to just ask customers how satisfied they are with an organization. Instead, if customers are asked if they are so satisfied with the organization that they would be willing to recommend the organization to a friend or colleague, then that is a much higher bar to achieve since it puts the customer’s reputation on the line.

This question was introduced to the public in 2003 by Fred Reichheld of Bain & Company in his Harvard Business Review article "One Number You Need to Grow." Using each customer’s answer, Reichheld proposed that you could group an organization’s customers into three categories:

Promoters (answered with a 9 or 10): These customers are not only very loyal but they are actively recommending the organization to others.

Passives (answered with 7 or 8): These customers are fairly satisfied with the organization but some of them might leave if they found a better alternative. Most of them are neither recommending nor disparaging the organization.

Detractors (answered with 6 or less): These people are not satisfied with the experience at the organization and are avoiding doing business with the organization. Many of these customers are actively disparaging the organization to others via word of mouth and on social media.

If you ignore the Passives, take the percentage of Promoters and subtract the percentage of Detractors, then you get what Reichheld calls, the Net Promoter Score (NPS). Reichheld states that while a high NPS is not a guarantee of growth, it is very difficult to achieve growth without a high NPS. Interestingly, customers tend to jump from the Promoters group to the Detractors group and vice-versa rather than moving sequentially up and down the line. This means companies can experience big jumps in NPS with improvements or deterioration of the customer experience.

Over the past 14 years, many companies have adopted the Net Promoter Score as a critical measurement of the current customer satisfaction and the likelihood of future success. These companies include Chase, Best Buy, Citigroup, TD BankNorth, Macy's and Home Depot. These companies want to measure how well they are performing on customer experience and satisfaction. They know that it is far easier and less expensive to make an existing customer happy than to try to recruit a new customer with costly advertising and marketing campaigns. Average NPS can vary greatly by industry, with auto dealers as the best industry by scoring 48; retailers, 35; banks, 32; and TV service providers rounding out the bottom with 11.

There are many advantages of using NPS for companies.

1. Simplicity: Using NPS is simple. You ask your customers one question and calculate one score. While the actual score is important, the trend line of the score is even more important. This can tell companies whether their recent efforts are helping or hurting customer satisfaction.

2. Word of Mouth: We live in a networked society, with many communication methods and social media platforms available to us to quickly share our positive and negative feedback about our customer experiences.

3. Customer Time: The NPS question can be answered by customers in less than 10 seconds, eliminating the need to bother them with long surveys.

4. Ease of Use: Since NPS surveys are very short, they can be easily conducted via a phone call, text message, mobile app pop-up, email or on the web.

5. Speed: The scores of these short surveys can be quickly calculated and shared with your teams almost immediately.

6. NPS Community: With a growing body of NPS research shared by enthusiastic proponents, new users can tap into this NPS knowledge base and connect with NPS devotees.

8. Customer Experience: 72% of companies said customer experience was their top priority for 2016, according to a Forrester Research survey. NPS allows your organization to measure customer experience across your organization.

As providers of online scheduling software that enables simple in-person communication, we believe that NPS can be a valuable tool for many companies to measure customer experience, loyalty and satisfaction – all in one metric.

We have started evaluating NPS for our own organization and will be reporting back on our NPS experience down the road. In the meantime, we would like to know if your organization is currently using NPS? If not, have you considered using NPS? If so, how you are you using NPS at your organization? Please share your comments below.

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